IMF chief urges leaders to swap fossil fuel subsidies for climate spending

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The International Monetary Fund’s chief has called on governments to remove fossil fuel subsidies to accelerate decarbonisation goals.

Direct and indirect fossil-fuel subsidies surged to a record $7.1 trillion in 2022, as governments supported consumers and businesses during the global spike in energy prices, Kristalina Georgieva said at Cop28 in Dubai on Saturday.

Governments should redirect these funds towards infrastructure that allows decarbonisation and climate-related research and development.

“We believe that with a package of measures that include carbon pricing, elimination of harmful subsidies and policy support that would bring an acceleration of decarbonisation in a meaningful way, we can still make this decade one where we can take pride in our actions,” she told the Business and Philanthropy Climate Forum.

Ms Georgieva also urged the private sector to move quickly to increase their climate mitigation investment, particularly in developing countries.

Emerging markets and developing economies currently emit around two thirds of greenhouse gases, according to the IMF.

The private sector will need to inject about 80 per cent to 90 per cent of the required investment, Ms Georgieva said.

“We need $5 trillion to make decarbonisation a reality and the question is, is $5 trillion, a lot of money?”

“Well, it’s obviously not a little but put $5 trillion next to $7.1 trillion direct and indirect subsidies, or next to the size of the world economy, which is over 100 trillion [dollars]. I think we should be brave and say yes, it can be done.”

The IMF boss said she is “optimistic” that the world is gradually moving towards blended finance “in a meaningful way but we just have to go a little faster”.

Blended finance is the use of development finance to mobilise additional funds towards sustainable development in developing countries.